There have been some recent changes to the PPP funding and loan program that we would like you to be aware of. These changes have occurred within the last week; we will provide a brief list of the newest information with helpful links and resources to follow. If you want to check out our earlier posts on PPP funding, head to our resource page or follow these links: Paycheck Protection Program (early April), Paycheck Protection Program Updates and Resources (late May).
Please note: the links and information below are pulled from the most recent data we could find. The processes and rules of the PPP funding are changing rapidly. Be sure to keep in close contact with you bank or lender for the latest information regarding your PPP loan.
On June 5, 2020 Congress passed and the President signed the Paycheck Protection Program Flexibility Act of 2020 into law. This act loosens some of the original rules of the PPP funding and loan program, allowing a larger window of time to spend the funds, longer payback periods, and more. Here is a summary of those changes highlighted from the Journal of Accountancy’s June 5 article titled “PPP forgiveness changes coming as Senate passes House Bill“.
1.) Current PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will have a 24-week covered period, but the covered period can’t extend beyond Dec. 31, 2020. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
2.) Under the language in the House bill, the payroll expenditure requirement drops to 60% from 75%. If a borrower uses less than 60% of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60% of the loan forgiveness amount having been used for payroll costs. This point was clarified on June 8 with a joint statement from the SBA and the US Treasury.
3.) Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
4.) The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
5.) New borrowers now have five years to repay the loan instead of two. Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The interest rate remains at 1%.
6.) The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.
This new information makes it easier for businesses and organizations to apply for a PPP loan. Banks and lenders should have the updated applications and documentation available for new borrowers. Organizations who already have PPP funds are also encouraged to reach out to their lender to see what changes can be made with their loan, based on these new rules. The remaining funds in the PPP loan program are anticipated to fully deplete soon, so if your organization is considering applying, now is the time.
Here are links to some of the resources we used in gathering information for this post:
- Paycheck Protection Program Flexibility Act of 2020 (US Congress)
- PPP forgiveness changes coming as Senate passes House bill, updated June 5 (Journal of Accountancy)
- Partial PPP loan forgiveness remains if 60% threshold not met, June 8 (Journal of Accountancy)
- PPP provides a lifeline, but more may be needed, June 12 (Journal of Accountancy)
- Small biz owners just got more time to use their PPP loans. Here’s what else you need to know, updated June 9 (CNN Business)
- Joint Statement by Treasury Secretary Steven T. Mnuchin and SBA Administrator Jovita Carranza Regarding Enactment of the Paycheck Protection Program Flexibility Act (US Department of the Treasury)